ESMA highlights importance of LEI for MiFIDII/MiFIR compliance

The European Securities and Markets Authority (ESMA) has published a Briefing on the Legal Entity Identifier (LEI) as part of its efforts to raise industry awareness and facilitate compliance with the LEI requirements under MiFID II ahead of its 3 January 2018 launch.

ESMA expects market participants to take all necessary steps to ensure full compliance with the LEI requirements under MiFID II. Based on its previous experience with EMIR reporting, ESMA urges reporting entities not to delay in addressing this important matter, as advance preparation will help in avoiding backlogs and ensuring that all market participants are ready for the new regime.

Legal Entity Identifier

The LEI is a 20-digit, alpha-numeric code that enables clear and unique identification of legal entities participating in financial transactions. It was developed, following the financial crisis, as a global system for the identification of legal entities. It has proven to be the most robust identification method for legal entities and as a result has been widely used by regulators in the European Union (EU) and globally. The LEI:

is key to improving market surveillance and transparency; it also generates important benefits for businesses in terms of costs reduction, improved risk management and increased operational efficiencies;

plays a key role in the new harmonised data-reporting regime under MiFID II and it is crucial to ensure the quality of the data reported to EU supervisors; and

is important for firms to fulfil their reporting obligations under financial regulations. LEIs are also key for matching and aggregating market data both for transparency and regulatory purposes.